The predetermined overhead rate for Zane Company is $5 comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9500 variable and $6050 fixed and standard hours allowed for the product produced in June was 3000 hours. The total overhead variance is
A) $3050 F.
B) $550 F.
C) $550 U.
D) $3050 U.

Question

Quizplus · Accepted Answer

Actual hours worked = 3000
Actual variable overhead = $9500
Actual fixed overhead = $6050
Total actual overhead = $15550

Flexible overhead budget = Actual hours worked x predetermined overhead rate
Flexible overhead budget = 3000 x $5
Flexible overhead budget = $15000

Variance = Total actual overhead - Flexible overhead budget
Variance = $15550 - $15000
Variance = $550 U

Therefore, the total overhead variance is $550 U. Option C is correct.

The Predetermined Overhead Rate for Zane Company Is $5 Comprised